Air India in talks with govt on turnaround

Faced with a Rs 60,000 crore debt, Air India is in talks with the govt for equity infusion and a soft loan even as it began a major cost-cutting exercise, which includes the launch of a low-cost domestic service this September.Aiming at a turnaround in the next 2-3 years with initiatives like starting Special Business Units in areas like maintenance, repair and overhaul, cargo and groundhandling, AI CMD Arvind Jadhav said the company was negotiating with banks and financial institutions to turn its high-cost debt of Rs 10,000-11,000 crore into low-cost.

However, the banks want the national carrier to get a comfort letter or a sovereign guarantee from the government to convert the high-cost debt into low-interest loans, he said."We have never written to the government for a bailout package ... we have never talked of waiver of ATF charges, waiver of taxes, waiver of penalties," he told reporters at New Delhi on Friday.

"The airline had made a presentation to the government on the need for equity infusion and soft loan and the government is carrying out a financial analysis," Jadhav said. Air India Express, the national carrier's low cost entity, will commence domestic operations from September with 27 percent of Air India's existing routes that were not profitable, he said, adding ten additional aircraft would be deployed for this purpose.

Noting that current market pressures would continue over the next two-three years, Jadhav said AI would start preparing for an initial public offering in 2010-11 as well as additional fund offering in the next fiscal.He said the national carrier was estimating an earning of Rs 180-200 crore through its low-cost operations on the domestic sector, which would "improve our bottomline".

Air India would gradually shift 70-75 percent of its existing domestic operations to Air India Express, he said.The airline will focus on high-density domestic and international routes and operate an "aggressive" route restructuring to provide seamless connectivity, he said.

A cost management and audit team has been set up to look at AI's overall financial restructuring, including debt servicing, risk management, hedging and other related issues.To questions on manpower rationalisation, he said the creation of SBUs relating to engineering, MRO and ground handling would lead to almost two-thirds of the 32,000 staff going out of airline operations, thus lowering the aircraft-to-employee ratio to match global standards.